Hidden Cryptocurrency In Divorce and How to Find It

[00:00:01] Hello and welcome to this episode of the D Shift podcast and today we're going to be hitting on something that is not just a timely question but one that I hear all the time and I can't answer these questions. So I have the perfect expert on here today. Chris Groshawn, we're going to talk all about cryptocurrency and different forms of that and how that plays out in divorce and what you need to be aware of.

[00:00:28] So I want to just introduce Chris because he truly is an expert in this. He's been operating Coinstructive for 11 years. Seven of those years he's been a cryptocurrency investigator and helping victims directly and acting as an expert witness and since 2024, Chris now focuses on crypto family law, especially in divorce cases.

[00:00:51] And we're going to talk a little bit about this later on because he is the executive director of a brand new nonprofit called the Crypto Recovery Alliance, which focuses on assisting people who have been impacted by crypto fraud by providing free services. So our low to no mental health care and scam awareness and prevention education.

[00:01:13] So we definitely want to talk about that. And I want to just say that I am so glad I know Chris because listen, he's also a member of InfraGard for public private partnerships with the FBI. And he has worked with the FBI on cases of cryptocurrency and people playing fast and loose with this. So Chris, welcome. Thanks, Mardi. Pleasure to be here.

[00:01:37] Well, and you are. I mean, there's very few people I think that are as expert in this and also have the ability to work directly with people going through divorce. That's the other side. I think a lot of people were kind of on the fraud side of it, but not so much on the divorce side. So I really appreciate you doing all of this. Did I miss anything in your intro? Anything you want to add there? No, you nailed it.

[00:02:01] Okay. Well, you gave me a lot of great information and I have the plus. I've interviewed you before, so I kind of knew some of this stuff. So let's hop right in here, Chris, because people really are concerned about the whole idea of crypto being this big mysterious thing that can be squirreled away and hidden and can't be tracked and all that kind of thing.

[00:02:27] So what do you think is the biggest number one mistake or thing that people miss when they're talking about crypto assets and digital assets? With regards to divorce or in general? Well, let's go in general first and then let's kind of look more specifically at what happens in divorce.

[00:02:46] Well, there's a lot of misnomers about cryptocurrency, right? I think the biggest one that I hear is that it's anonymous, right? Like, oh, Bitcoin, that's that first doing illegal stuff on the Internet. Yeah. Yeah.

[00:03:03] It's not anonymous, right? And that's why we're able to use tools to track and trace things to then pinpoint where the assets have gone. Not necessarily tracing to a specific person, but you can trace things to an entity. You can watch where the funds go. And if things do get deposited at an entity like a crypto exchange, well, then now you know that someone has an account there, right?

[00:03:31] So that's where then you would you can subpoena. You can get your lawyer involved to find out who owns that account. Right. Right. Is it is it your spouse or is it somebody else? Are they sending money to somebody else, a business partner? Are they squirreling it away for themselves? You can't. These are the things that, you know, people don't understand how Bitcoin operates or cryptocurrencies operate. So they just kind of go, well, I'm pretty sure it's all gone or something like that. Right.

[00:04:01] And really, you're leaving money on potentially even money on the table. And a lot. And I'm just going to say this. And again, this is not a knock on attorneys. Attorneys aren't supposed to be experts on, you know, all the different financial transactions and ways that people can move money around.

[00:04:16] And they're also not supposed to be therapists or anything else. But a lot of attorneys themselves are not familiar with the whole understanding of how how trackable crypto digital assets really can be with an expert like yourself involved in the process. Well, it's actually even a step below the attorneys. It's everybody in that kind of in that chain that would help you traditionally through your divorce.

[00:04:44] Like, usually a divorce attorney has already partnered with and been working with for several years or if not decades, a forensic accountant. Right. And these people are like they're the industry experts. Right. On anything financial, when I can't, you know, they look at all your bank statements, they look at retirement accounts, they help build the financial picture. Right. So then you can divide those assets. Right.

[00:05:12] Right. Unfortunately, most of those people have never been exposed to cryptocurrency or very little and definitely don't have access to the tools or know how to do tracing. Right. So they're literally at a disadvantage. And most of the attorneys in this space don't have somebody like me they can just turn to. Now, granted, it's still probably like one in seven or one in eight cases involves cryptocurrency.

[00:05:41] And then even then, a lot of times the cryptocurrency is very straightforward and simple, so you don't need to hire an expert. Right. Right. It's when it gets crazy and there's lots of movement and activity and wallets all over the place and who knows what was going on. And then then you need somebody who can help to try to decipher the activity, where things are now and and paint that holistic picture.

[00:06:07] So that's why at Coinstructive, we actually do both. We have a forensic accountant on staff to do traditional. So that way you don't have to go to two places. You can hire one next one set of experts at one company and pay one bill instead. Yeah. And then then if it is just kind of basic, that person can handle it. If it gets more complicated, I'm guessing that then you take over and really do the the invest more investigative side of it.

[00:06:33] Exactly. Yeah. So what are let's let's maybe even step back from that. Let's say somebody is not even sure that there is any crypto involved. What would be some of the red flags that you that say I could look for if I was concerned? Does my spouse even have cryptocurrency? Is this even a thing I have to worry about?

[00:06:55] Well, usually spouses have been talking to their partners, especially because cryptocurrencies seem to go through this about every four to five year cycle where they increase dramatically.

[00:07:11] OK, so usually sometime in that upward swing, there's there's this this rush of like adrenaline and like excitement because your initial investment is now five or 10 X. So if you put 50 grand in and that's worth 250 or you put 100 in and it's worth a million. Right. Yeah. Like, oh, my goodness. Like you're going to tell somebody you can't just keep that to yourself.

[00:07:40] It's like if you won the lottery, like could you actually not tell anybody? Probably not. Probably not. Most people could. So there that's one of the signs is remember the conversation past conversations. Usually they've shown you a screenshot or they've told you over dinner like, hey, our crypto is doing really good. Guess what? Like it's now worth 800 K. Oh, that's amazing. Now, they only talk about it when it's going up.

[00:08:09] Right. Right. Right. The other half of that every four year cycle is that it goes down. So literally today, if we look at the numbers, they're about 50 percent off from where they were nine months ago. So, you know, if you value something then versus how you value something now today can be dramatically different. And that's just because of the volatility of the price of the asset itself.

[00:08:36] So really, it really comes down to not necessarily like dollars. Right. It's about tracing the actual asset just because like if it was an expensive car, a boat or a house, those things all vary in their value based on the market and other factors. So you kind of have to treat crypto the same way.

[00:09:01] It's an asset that can fluctuate in value and you just kind of have to make sure that, you know what what what what you have. Right. Now, the question again, going back to is how do you know another another way you can tell is by looking at your old past bank statements and looking for deposits to cryptocurrency exchanges or even the purchase of hardware devices. So I had one client who said, I know I know there's crypto.

[00:09:31] I've heard him talking about it, but I can't prove anything. Well, she went through old PayPal statement or bank statement and found a purchase of a treasure, which is a device that I got there in a black box up there on the screen. And I don't get it. OK, and it's a it's like a key fob thing, but it's a it's a hardware wallet. This is a physical device, which is another thing. Have you ever seen any physical devices in the house that are used to store the Bitcoin?

[00:10:00] Right. So if you can find a purchase order for something like that or you can find a deposit to a crypto exchange. Now you have leads. Right. Because you can follow the dollars because you had to take the dollars from someplace to convert it to cryptocurrency. Just like if you were going to Japan and you needed yen. You have to convert it. Right. Right. So there's going to be a record of that conversion somewhere. Right.

[00:10:29] How did they get the money to the place that they needed to get it to? They didn't like if especially because crypto is all digital. So it's got to be online, which means they had to wire it to the crypto exchanges bank, most likely or connect their bank account. And there will be a withdrawal through ACH or a wire or something that shows up.

[00:10:51] OK, so that would be things that if you've already had a traditional forensic account and look at things, you would want them to see if they had identified any large transactions or any transactions going to a crypto exchange. And that would be then the point that you would go to the exchange and you could subpoena them and say, here's the the name of the person, their social, their phone number, their all this stuff. This is what it's for.

[00:11:21] We're going through a divorce case. They've been hiding assets. We need the records for this. As long as it's all signed off on and everybody's, you know, all the legal things have been checked. Right. Ninety nine percent of the time you're going to get the data back. Can I ask Chris now? Now, this is this is where I don't know any about this. So I'm really asking probably a silly question. But if the if the exchanges because some of those exchanges are in different countries. Right.

[00:11:48] So if the exchange is in, say, China, just use that. I'm sure that can Americans or Canadians or Europeans use those or are you required to stay within your own country for these exchanges or how does that work? That's a great question. So. You're supposed to. And there's licensing and things in place so that U.S. companies are supposed to serve U.S. customers only.

[00:12:13] However, with the use of VPNs and things like that, you can easily get yourself into a foreign exchange. And and then, yes, it becomes a lot more difficult to have them cooperate. Yeah. So especially like you have to know you have to know your spouse. Do they have do they have dual citizenship someplace? Right.

[00:12:39] Do they have foreign bank accounts where they could have cash in another country and then pushing that through a foreign exchange because they have a passport from, you know, Thailand or Singapore or something. Right. And then they're using all these, you know, Southeast Asian exchanges that won't comply with a U.S. subpoena. Right. Right. So you can show that the money went in there, but you can't really do much after like showing that. Right.

[00:13:05] So really what the cryptocurrency tracing does is it helps paint the picture of what happened to the assets so that you can you can share this information with the court so that a mediator or a judge or somebody like that can actually understand what happened to the funds so they can decide how it should be distributed.

[00:13:30] And in some cases, right, if those assets weren't disclosed up front, that 100 percent of those assets can be awarded to the other party because they're hiding them. Right. Which is which is a huge thing.

[00:13:42] So, you know, there has to be there has to be a balance between what you think you can get back and how much you want to spend digging into all these different rabbit holes, because tracing cryptocurrency can get extremely complex and take a long time and it can be expensive. Yeah. So that's one of the things.

[00:14:04] But if if there's a half a million dollars hiding and you know that there's something there or there was a half a million dollars, even if there's two hundred and fifty thousand dollars now, if you spent one tenth of that to get it back. Yeah. That's probably worth it. Right. Yeah. You had to spend half of it to get it back. That's not probably probably not worth it. But, you know, you're you're thinking about potentially your child's future, your future and anything that you can get. Right.

[00:14:33] Is is better than nothing. And so unfortunately, sometimes you've got to spend money to get the money. But if it's there, it's where it's totally worth it. Yeah. And sometimes, you know, depending on how good of a negotiator you are at the mediation table, if you're going the mediation route, you may be able to recoup most of those expenses. You know, because I'm just going to say that people are hiding cryptocurrency. They're probably not reporting that to the IRS and other reporting agencies as well. And that can be a little bit of leverage.

[00:15:03] Right. You know. Yes. Yes. Yes. Yeah. Also. So you just touched on a very big point, actually. And this is probably the third thing that you should be looking for is if you've had those conversations about cryptocurrency, but it's never been filed on any of your tax returns. That is not a good thing for you. Yes. Right. And there is something called innocent spouse relief that you can file with the IRS. Yes.

[00:15:32] And it's basically saying, even though I've signed and filed my tax returns with my partner, I didn't have all the information and things were kept for me. In case you guys ever audited us, I want you to, I'm like, I'm waving the white flag. I did not know. Right. Right. Because what happens is in the future. Right. Because what is this? I don't know what the actual statute of limitations, seven years, 10 years. I don't know. They change it all the time. It could be five years. Who knows?

[00:15:59] But whatever it is, if you've been divorced for like five years and an IRS audits a year where you were married. And let's say your spouse is now broke. Yeah. They don't care. They'll come after you for the money. They come after everybody. Yeah. Yeah. It doesn't matter. If you have money and another person doesn't, I mean, there's a bill to pay. They're going to come after you. Yes. So this would protect yourself. Right. So things like that, that would be another step to take and something else to look for on the tax side. Right. Right.

[00:16:30] And that's, again, we're not providing any kind of legal or financial advice on this podcast or telling you what you should or shouldn't do. You need just questions that you might be interested in speaking with your attorney about if you have some concerns. So, Chris, and I always show that little language in there somewhere along the line. So the limited amount I know, I know that you have these wallets and you have like a password, a key. And if you ever lose that key, that's it.

[00:17:00] You're locked out forever. And I don't know what happens to the cryptocurrency, where it goes or what happens to it. Or they, you know, your partner says, well, I don't. Yeah, I opened that years ago, but I don't have the keys. I've never seen what the balance is. Or, you know, yes, I had something in there and then my computer was hacked and my accounts were empty. Like what happens in cases like that? So that's a really great, that's a really great point to bring up.

[00:17:25] Yeah, I've actually worked cases where in the middle of the divorce, one of the party holding the crypto was scammed. Okay, so there's two things, there's two ways you can look at this. Oh, what an awful timing situation. Right. Right. There's a legitimate scam. Somebody got scammed. Two, they made it up to hide their money themselves and are faking it. And that would be obviously really bad.

[00:17:56] If you could prove that they weren't. It's not always possible to prove. But it's kind of like stacking the evidence. Right. So that it's almost like you can't reach another conclusion. Right. If like if the money was going into mixers and tumblers right away, which is not typically what we would see from at least what we're seeing in like larger crypto hacks and thefts.

[00:18:25] They're usually going through bridges and swaps, meaning they're trading them for another cryptocurrency right away. That doesn't need, you don't need permission to use the service to do it. So like an instant exchange swap, and they'll go from one cryptocurrency to another, and then they'll move it. And then they'll usually deposit it into one of those foreign exchanges that doesn't cooperate. So then they can launder the money through the exchange.

[00:18:52] Now, what we're talking about and when we have a loss and we're trying to find the funds, it's not always 100% clear as to like what happened to it. So a lot of times it's still there's a little bit of an art to doing crypto tracing because, again, you don't have specific people tied to accounts. Right.

[00:19:22] All of those wallets that you were mentioning. So you really have to rely on these entities and endpoints to be able to track the funds to get more information from. If the money is sitting in a wallet that hasn't moved saying, I don't have the keys to access that anymore. Or, you know, I lost that wallet. Like, I don't know what to do with it. It's done.

[00:19:47] Well, if the keys were literally lost, then those funds should never, ever move. Right. It's essentially what they call burned. Because if you can't recover the seed phrase or the private keys, that's your ability to be able to move the assets. If you can't unlock that, you'll never be able to move them.

[00:20:10] It's kind of like if you lost your email password and you couldn't reset it, all your emails would still be there. And they could still be coming in. Like, people could still be sending you money to that Bitcoin address. Right. But you would never be able to access it because it's still a public address. It's still there. It's still available to use. It doesn't disappear. Right. So, in a case like that, what you would do is we would do a monitoring.

[00:20:36] So, we would put that wallet into our monitoring software and it would notify us if it ever moved. So, this would be something that you would put into the motion with the court as how do we want to divvy up the cryptocurrency? Well, we're planning to divvy. We can't divvy it up because no one can access it. However, if it ever moves. This is how we're going to do it. Yeah. We're going to handle it this way. Right.

[00:21:06] And then we can reopen the case. That's the only way. Because if six years later, those funds move and they go to an exchange to cash out because now they're worth, you know, five times as much. Somebody thinks that they are going to get away with it. If it. Yeah. And if it's not written in there, they are probably. Right. Yeah. Because how is the other person going to know? You just have to randomly check. Exactly. Exactly. So, I've got one more cryptocurrency question. And then I want to talk a little bit about your nonprofit that you've set up, Chris, if you don't mind.

[00:21:37] The whole idea, and we were kind of, you started to touch on it there in a couple of your answers. What, what's the best thing to do? Like, should you, if you're at the, you know, at the mediation table and the partner and your partner says, or your soon to be X says, let's just split it 50 50 with what's exactly in there now. And you agree to that. Should you do like a cash buyout? Should you take the coin and set up your own wallet?

[00:22:04] What, what's the best kind of easiest, cleanest way to do this? Well, it's, there's not necessarily, let's not think about it as the cleanest or easiest way. Let's think about what's most beneficial to you long-term. So again, not financial advice, but as we talked about earlier, if the volatility of cryptocurrencies are so high and they go through four year swings. Right.

[00:22:30] Just listen, just, even if you just look at the historical values of Bitcoin, there has been no asset that has increased value faster than Bitcoin in the last 15, 20 years. Right. So just knowing that depending on like your time preference and your investment horizon, or like if you need to cash now, like everybody's situation is different. So you have to take those things into account.

[00:22:53] However, if you were to get a cash buyout that we all know that, well, most of us know that cash is actually just cash sitting there is not making any money. And actually it's because of inflation, it's actually losing value slowly over time. Right. Right. So if you held Bitcoin or something like that, which is provably deflationary because of its limited supply, right?

[00:23:20] That means that it will eventually go up over time. Okay. So do you want to hold dollars that will eventually lose part of its value? Or do you want to hold something that will be worth more dollars later? Right. So to me, I would take the cryptocurrency if I didn't need dollars right away. I would probably take the cryptocurrency and sit on it because that could pay for my children's college funds. It could be like an extra 401k. It's liquid.

[00:23:49] So and then as especially because here's where we're going to. And I know I'm kind of getting long winded here, but the banks and the credit unions have already been given permission to sell cryptocurrencies. Okay. And hold them for you on your behalf. This is going to make it easier for people to to hold and buy and gain cryptocurrency assets. So the the beauty of that will be then other similar products that we're used to will be then you can use with cryptocurrency.

[00:24:19] So imagine if you had a half a million dollars worth of Bitcoin, you park it at a bank and then you take a loan against it. Your own collateral. Right. Right. And if you know that Bitcoin goes up over time. Then instead of having to pay back a hundred thousand dollar loan with with, you know, one fifth of your Bitcoin.

[00:24:42] If it doubles or goes up five times, now you're having to spend even less to pay back that same amount. So you can use the money to your advantage if you have it. But if you have dollars, there's not as much you can do with it. Right. So so to me, I would personally take the Bitcoin if I was in a position that I could could. Yeah. And I think thank you for sharing that. And I think the other thing is you just hit the nail on the head.

[00:25:11] What do you need immediately after your divorce? Because some people are in that situation where they just really need the dollars. You know, they need to they need to buy a new place. They need to get set up. They need to, you know, rebuild. So, again, it really depends on your situation. And really quick, Chris, I want to talk about the Crypto Recovery Alliance. I'd like you to talk about that. And just because I think this is a phenomenal, a phenomenal thing you're doing. So can you tell us a little bit about that? Yeah.

[00:25:39] Let me add one thing, too, about divorce assets for crypto, too. If there because it's not always gains. Everybody. Oh, there's always gains. Right. Sometimes there's losses. Sure. Don't leave those losses on the table because you carry those losses forward. Now, although my understanding is you can only use three thousand dollars of it to pay it down against regular income that you would earn on annual basis. So if you had fifty thousand dollars of losses. Right.

[00:26:07] You could only pull out three thousand dollars a year until it's gone to pay up against your taxes. But if you had a capital gains. That required a large amount of money to pay taxes on, you could use that whole chunk to pay it off. So it's kind of like a savings account with the IRS. Right. So don't let the other partner or spouse get all of that benefit on the losses. If there's losses, fight for half of that, too. Right.

[00:26:32] Right. So it would just be prudent to make sure that you're not leaving anything on the table, even losses, which could be essentially a value that you would recoup later. And again, this is where understanding really plays a big role. Making strategic decisions. Yeah. OK. So the Crypto Recovery Alliance.

[00:26:52] This has been something that's been near and near to my heart since I actually started serving victims of cryptocurrency fraud, because when I started, I was in a I was in a not a great financial position. It was right around covid after like a long bear market. And essentially, I hadn't had any work in a while. So I really needed some money coming in and I couldn't afford to take cases where people couldn't pay because I needed that. I'd be just like that. I'd be broke, too.

[00:27:22] And I wouldn't be able to help anybody. But so eventually, once I got a little bit of footing under me, I really wanted to make a push to create a nonprofit that could essentially do the same thing for people who couldn't afford services, who were feeling destitute or suicidal or having mental health related type trauma because of the situation they find themselves in.

[00:27:46] Right. And we're looking at everything from, oh, no, now that I've been scammed and lost, you know, our our almost all of our life savings. My partner is divorcing me because they were told that's the best thing to do to save the house. You know, and like now my adult children won't talk to me. I lost my job because I haven't been able to focus.

[00:28:06] And it's like a crazy spiral that people find themselves in that I just I felt so drawn to working with this class of victim because it's new. Right. Most people think, oh, victims of crimes are sexual violence or physical violence, that kind of stuff.

[00:28:30] But like when we talk about psychological manipulation and financial crimes, there aren't a lot of services for people in that regard. So I felt it was really important to work towards building something that addressed the access that people need to get these these traces, because one, there's a really big. The biggest blocker in this industry right now is the cost of the tools for law enforcement to access them.

[00:28:59] So this is putting us in the same position where we were like kind of in the early 90s when we were talking about DNA. So imagine some podunk town somewhere and there's a murder and they know how to collect evidence and they get all their stuff, but they don't know how to run a DNA sample. They have to they're told send it to D.C., send it to the feds because the feds will run it. This is how we treat cryptocurrency today. Most local law enforcement says I don't have the tools to do these tracing. Please go to the feds.

[00:29:28] So then they go to the feds and sometimes you get help and sometimes you don't usually dependent on whether or not one your case ties into another case that they're already working or two. You lost at least a million dollars and that will kind of that's kind of their trigger to then individually look at your case. But if you lost a half a million dollars and you got no help, imagine what that's going to do to you psychologically. And then likely you're going to go online and try to figure out, OK, well, how do I get my crypto back in another way?

[00:29:57] Which now there's all these recovery scam companies that are preying on people. So that's part of the prevention and awareness and education is know when they're targeting you, because once you've been targeted once, they will continue to target you over and over again. So it will be a different scam, a different opportunity, a different person. But they know your phone number. They know how to get in hold of you. They know your contact information. They will continue to find you.

[00:30:25] So across those three things, investigations, mental health and education, we think we can really help people move through this situation and get the information they need to to ground themselves and to understand what is the reality that they're looking at. And if they are going to get money back, when might that happen? And I have to tell people like it's it's not instantaneous. It might be three to five years.

[00:30:54] OK, but we're getting now to the point that because the government has said you the banks can do this, the credit unions can do this. The writing is already on the wall. And in a short time period here, law enforcement isn't going to be able to say, sorry, we can't do these anymore because all the money in your app on your Wells Fargo chase, whatever bank you're using, Bank of America, they're all going to be using digital dollars on the back end.

[00:31:22] And you're not going to know the difference. And if that was stolen or scanned or you sent it someplace, regular law enforcement is going to have to learn how to trace those assets. Yeah. Yeah. And that's where we're going. Yeah. Well, I'm so I'm so thankful that you've got this set up and I'm you know, I just I just want people to understand that there are services out there. Chris, last question. If people want to reach out, find out more about what you do or maybe get in touch with you about working with them during their divorce, what's the best way to do that?

[00:31:52] So you can contact us directly at point. You can visit us at Coinstructive dot com. There's a whole website page directed for civil litigation and divorce related activities. There's a button that you can push and fill out a form directly. If that seems a little over the over the top for you, you can just use contact at Coinstructive dot com to send us an email and we'll get back to you.

[00:32:17] Yeah. And there I know that I know I've had a couple of clients that I've sent your way and they said they looked at your website and it was fantastic. And that you just made everything sound really clear and uncomplicated to them. So thank you for what you're doing, Chris. And thank you, everyone, for listening into this episode of the D shift. And don't forget to tune in next week.

[00:32:49] Thanks for listening and supporting The D Shift. If you would like to attend live trainings by our amazing guests and have a chance to ask questions and get answers from our experts, join the D shift crew. For more details and to sign up, head on over to www.divorcecoachforwomen and click on the podcast page.